The Manhattan Homologue

Explorations of Manhattan's present and future real
estate market based on current observation and past
events.

Not Drowning But
Wavering.

04/15/09

(with apologies to
Stevie Smith)

A reader asks, "What's
going on with the high-end market?" Our last two
posts have been about low-end activity but that
question remains: What IS happening with the high-end
market?

Not a whole lot.

In recent years Manhattan Homes Inc. has
predominantly served this segment of the market,
helping buyers and sellers in the $3-5 million plus
price range. Now, we have an unusual situation
brewing: as far as we can tell the lack of "movement"
has not been obligatory but rather by choice. This is
true of both buyers and sellers.

For those of you familiar with the approval process
practiced by co-op boards in NYC (and please note:
co-op apartments account for around 75% of all
residential ownership), included with each
purchaser's "application" is a full disclosure of
their financial status. As the broker, we see income,
assets and liabilities, and though this information
must remain confidential, we can say our observations
at these price levels have rarely revealed
circumstances even remotely approaching "borderline".
The buyers have been cash rich, income rich and their
debt to income ratios have usually been at 15% or
lower. Even if we were to assume these buyers'
investment portfolios dropped 50%, their buying power
has remained within acceptable limits. Their decision
not to buy is exactly that: a decision, and not a
necessity. Right now, many a buyer wants something
new but can't bring themselves to do anything about
it, or their thoughts go back and forth between
wanting to do so and not wanting to do so. As for the
sellers, their profile is similar. Whatever losses
they've suffered have not threatened their ability to
hold on to what they've got, and they, too, have
simply withdrawn from the market--for now.

Of course, there are exceptions. Clearly, victims of
the Madoff debacle who were fully invested with him
have been truly devastated and have been compelled to
sell, or are no longer viable buyers. Also,
individuals or families with single wage earners who
have been laid off or "shown the door" are
vulnerable, too. But these situations along with a
few others of similar effect represent a small
minority.

What is going to happen? Recovery--and this could
happen sooner than many think. There are several
variables that affect a bad economy and some have
fixed life spans that can influence the speed of
fiscal convalescence, but two--the situation
described above and the decision by banks to lend or
not lend (the money's there folks)--can legitimately
be described as a simple switch that can be toggled
at anytime, and this...is a good
thing.--Leigh Zaph. (any comments can be
emailed to us atwebitorials@manhattanhomesinc.com,
thanks).